Portfolio Update September 2017


Another month – another update!


Company Stock Units Price Date Cost
TEVA TEVA 100 $15.86 2017-09-01 $1586.00
Ensco ESV 400 $4.49 2017-09-05 $1796.00
Helmerich & Payne HP 30 $43.81 2017-09-05 $1314.00




TEVA was added to my watchlist as it’s the largest generic drug manufacturer in the world and the stock price just seemed to fall without a bottom. Cutting the dividend by 75% didn’t helped either. I was reading more and more about this company and the current situation and I was a little bit surprised by the huge amount of generated cash flow. All things considered (debt, decreasing operating margin, no CEO) the risk/reward ratio just seemed very compelling to me and I bought a small position.
Today they approved a new CEO and I’m very pleased with this decision. Kare Schultz is a former COO of Novo Nordisk. And as you know, I’m a big fan of Novo Nordisk. After leaving Novo Nordisk he helped with the turnaround and restructuring of Lundbeck (another Danish pharmaceutical company). So I’m eager to see the next steps of the company and would even add if falls below my entry price.

I also added to my Ensco position. As a cheesy side note: by looking at my portfolio , my stock position in Ensco and the company itself have one thing in common: they operate under water.
When I started with my investment journey I was compelled by the dividend growth rate and high yield of the offshore drillers. Needless to say, I was short sighted and it ended very badly for me. Ensco is the last offshore driller in my dividend portfolio. I’m holding to it and added to my position because I still think there will be a turnaround at some point. I’m not convinced the supply/demand oil situation is forever in the favor of supply. The big oil majors were slashing their deep sea capex by big numbers in the last years. But who is replacing the depleting wells, when there is no or minimal investment in new offshore wells? Just to confirm my perspective: in 2015 the global offshore production were contributing nearly 30% of the global crude oil output. To make a long story short (no pun intended): I speculate about the recovery of the sector at some time and when I see a stabilization of the WTI/Brent price in the last months, but nearly no reaction to the declining stock price of Ensco or every other offshore driller, I know this sector is abandoned and hated and it’s time to add to my position. I don’t think there will be a big increase in oil price over the next years, but I hope for a stabilization in the mid $60s for Brent which would lead to new contracts, although with minimal day rates.

But I also have to add, that with the acquisition of Atwood (another offshore driller) and the associated debt, Ensco may have only little over two years left of liquidity before it will need to look how to repay debt without a proper improvement of the backlog. So it’s a big speculation and we’ll see how it goes.

Another speculation position, although not nearly as drastic, is my buy of Helmerich & Payne. Another oil contract driller but with most of the revenue coming from US shale (land) rigs. The balance sheet looks solid to me, although the dividend isn’t covered and is indeed in risk of cutting. This was also confirmed by the CFO:

As mentioned in the past, it is unlikely that the company would issue additional debt with the sole purpose of sustaining or increasing current dividend levels.

If they cut the dividend, the price will experience a fallout and I will add to my position because without the high payout ratio the balance sheet will look even better. This contradicts the intentions of a dividend growth investor, but I already acknowledged that I’m more risk-tolerant and I like the idea of being opportunistic.

Portfolio News

Gilead acquired KITE! From Wikipedia:

Kite Pharma is a publicly held, clinical-stage biopharmaceutical company engaged in the development of novel cancer immunotherapy products with a primary focus on engineered autologous T cell therapy designed to restore the immune system’s ability to recognize and eradicate tumors.

As I’m still heavily overweight in GILD, I’m more than happy with this move.

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